Friday, January 21, 2011

Kan tries again on trade

When the DPJ was campaigning to unseat the LDP in 2009, its manifesto included a pledge to "conclude" a free-trade agreement with the United States. The agricultural lobby flexed its muscles, and shortly after releasing its manifesto the DPJ issued several "clarifications," changing its pledge to reach an FTA with US to a pledge to "begin negotiations." Kan Naoto insisted that it would not conclude any agreement that harmed Japan's farmers. While the party claimed otherwise, the issue was effectively dropped for the duration of the campaign and the DPJ's first year in power.

After his victory over Ozawa, Kan, now prime minister, brought the issue of trade openness back onto the agenda in the form of Japanese participation in the Trans-Pacific Partnership. Simply put, Kan's initial attempt to clear the way for Japanese involvement in TPP was stymied by the agricultural sector — with help from members of the DPJ. The lobby argued that participation would devastate Japanese agriculture, and forced the government to make a weak commitment to "study" participation, a climb down considering the soaring rhetoric with which the PM announced that his government would study participation in his policy speech at the start of the autumn Diet session.

However, with the start of a new year and a new Diet session, Kan, far from being chastened by the earlier defeat at the hands of the agricultural lobby, is positioning his government to begin the campaign anew. As Corey Wallace notes, the "themes" of this reshuffle were tax and pensions reforms and TPP. Regarding TPP, the most significant change was the appointment of Kaieda Banri as minister of economy, trade, and industry. Moreover, Hachiro Yoshio, a former farmer, was replaced as Diet affairs chairman by Azumi Jun. Combined with Maehara Seiji's staying on at the foreign ministry — Maehara has repeatedly called attention to the importance of economic openness for Japanese foreign policy — Kan managed to put into place a team that will be committed to the fight for free trade. His cabinet quickly agreed to TPP participation as a basic policy of the latest Kan government.

The question is whether Kan will be able to translate this ambition into reality. At the very least, the Kan government (and the DPJ) appear to have found their purpose. After fumbling around in search of a major issue or two to devote its energies to, the DPJ-led government has decided to tackle two rather pressing issues, which, combined with the challenges in Japan's bilateral relationships, passing the budget and budget-related bills, and managing life as a de facto minority government will be more than enough to keep the Kan government occupied.

But in pursuing an open Japan — Kan's New Year's message was devoted to his goal of a third opening, a "Heisei opening" that would mean not just a Japan open to more imports but open to cultural, intellectual, and social exchanges across borders — the Kan government arguably faces an even steeper battle than Koizumi faced when he took on the postal system, meaning the postal workers and their allies in the LDP. Between the rural bias in parliamentary representation (which, given the size of the DPJ's parliamentary caucus, inevitably means that there will be battles within the DPJ), the opposition of local governments in rural areas throughout Japan, and the outsized power of Nokyo, the Kan government faces formidable and perhaps insurmountable obstacles to bringing Japan into TPP.

A basic understanding of international political economy is that free trade falters because its costs are concentrated while its benefits are diffuse. Plenty of states have joined free-trade agreements, suggesting that this fundamental tenet may not be all that fundamental. But what can the Kan government do to overcome the determined resistance of the agricultural lobby and its allies? For starters, the government needs to build a coalition of its own to rival the anti-TPP coalition. Business peak organizations like Keidanren will be indispensable partners for the Kan government if it is as serious about TPP as it says it is. Given the frosty relations between the DPJ and big business, the "anti-business" planks of the DPJ's manifesto, and the party's ties with organized labor (and big business's traditional ties with LDP), building this coalition will take some work, although this meeting between Kaieda and Keidanren's Yonekura Hiromasa is an encouraging start.

But it will take more than the help of friendly interest groups for the government to succeed. Ultimately, TPP may be the first big test for the DPJ's parliamentary-cabinet system. On paper, the DPJ's new policymaking process ought to (1) enable the government to coordinate its strategy on TPP across the relevant ministries (METI, MAFF, MOFA, etc.), (2) keep all cabinet ministers on board with the policy, (3) silence opposition within the ruling party, and (4) make strong, direct appeals to the general public about the necessity of the government's program. It is not a perfect analogue, since the upper house, now controlled by the opposition parties, gives the opposition parties procedural weapons they lack in the UK. However, the Kan government still has considerable tools at its disposal. The question is whether it uses them. As Andy Sharp argues at The Diplomat, it may well take a Koizumi-style PR blitz for the Kan government to win on this issue. It needs to hammer home why TPP — and greater openness more generally — are good and necessary for Japan. The idea that trade policy is an arena where groups with "objective" interests derived from their position in the global economy is overstated. Even among urban residents, thought to be the natural constituency for free trade, support cannot be taken for granted. The policy will not sell itself; an pro-TPP interest coalition needs to be constructed. The government's plan to convene town halls across Japan in February and March to explain the benefits of the policy are a good first step. But more talk will be needed. And side payments in one form or another will be unavoidable.

There is considerable risk in taking on TPP at the same time that the government will be debating a consumption tax increase linked to pensions payments, which, if not handled properly, could produce public opposition that could overwhelm the patient work of building a consensus on TPP. Nevertheless, as the Kan government and the DPJ begin a new year in power, they seem to be finding their bearings on policy. This government may yet leave a positive legacy.

4 comments:

I'd like to say first of all that i am not trying to launch here a leftist diatribe against the ills of free trade, but i would like to ask you to clarify, if you can, what exactly the Keidanren hopes to get out of the TPP. If you look for instance at what METI has been up to for the past year or so and you see vigorous pushing of Japanese technology into all sorts of markets - the Persian Gulf, India, even the US. What specific kinds of barriers does the Keidanren expect to overcome by joining this agreement? Cui bono essentially.

Also, i have to confess that i am having difficulty extricating the difference between Mr Kaieda and Mr Yosano's functions. Yes, Kaieda-san is [for the time being] the METI minister, but what exactly IS Yosano-san's portfolio?

To answer the latter question first, Yosano is a "minister of state for special missions," one of a handful of ministers whose portfolio is a certain cross-ministerial issue instead of responsibility for leading a ministry.

Regarding the former, I don't think it's all that complicated. If TPP goes forward with more members and without Japan, businesses in participating countries will be more competitive than Japanese businesses.

what i see on tv makes me think Kan is not going to get any cooperation from the opposition at all. komeito and SDPJ seem determined to be obstruct anything and demand elections. in this case, isn't the best thing for Kan to do to call their bluff and hold snap elections ASAP? this way he can try to show strength and boldness going into elections, rather than looking more hopeless and weak by the day.

surely no party could win a majority in any election held soon? with approval for the DPJ and LDP looking similar, they may still end up the largest party - and perhaps the opposition losing their basis for refusing to cooperate - and forming a coalition government like in the UK?

Another spot-on observation. I'd perhaps also like to add that this seeming paradox - myopic protectionism hand in hand with pre-Ricardian notions of international trade - is a defining characteristic of Japan's historic ambivalence to the outside world in general and liberal capitalistic world order specifically. In some ways, Japan is still an isolated island nation. Japanese politicians lack the moral authority to serve their citizens, even less the ability to lead.

About Me

Tobias Harris is a Japanese politics specialist who worked for a DPJ member of the upper house of the Diet 2006-2007.
He has been published in the Wall Street Journal Asia, Foreign Policy, and the Far Eastern Economic Review, and has provided commentary for CNBC, CNBC Asia, Bloomberg, BBC, and NPR.
Tobias is available for research and consulting projects. He can be contacted at observingjapan@gmail.com.